By Clancy Yeates
THE Australian dollar has leapt to within a whisker of parity with the US dollar, as financial markets bet the world's biggest economy will soon resume printing money.
Last night the currency struck a fresh 28-year high of US99.94c, sparking predictions the dollar would overtake the world's reserve currency within days.
Financial markets have dragged down the greenback across the foreign exchange board because of fears its central bank, the Federal Reserve, will increase the global supply of US dollars next week by more than $US1 trillion through ''quantitative easing'', the modern equivalent of printing money.
The US economy is stagnant, and the Fed is under growing pressure to resume buying US Treasury bonds, which raises the global supply of greenbacks.
The Fed unveiled the tactic early last year in an attempt to spur demand. Economists think another round, dubbed QE2, will start next month - after board meeting minutes this week signalled it was on the cards.
This prospect, coupled with Australia's mining bonanza and high interest rates, has propelled our dollar to heights not seen in almost three decades.
Westpac's chief currency strategist, Robert Rennie, said a speech from the Federal Reserve governor, Ben Bernanke, tonight could give more details of the plans. Such news was likely to drag on the US dollar and boost the Australian dollar.
''I would be surprised if we have not seen parity by next week,'' he said. ''I think the foreign exchange markets are really gunning for that point.'' John Kyriakopoulos, of the National Australia Bank, said it could go to $US1.10 in the next six months, and stay ''stronger for longer.''